Soumik Kar

Like most of the FMCG pack, Britannia Industries has been a market favourite given its improving performance in the first quarters of FY19. With the ‘Patanjali effect’ waning off, Britannia has been able to register double-digit net sales growth aided by pick up in consumption especially in rural areas with elections around the corner. The stock from its 52-week low of 2,200 on February 6 gained 57% to reach its 52-week high of 3,472 on August 23. While the stock came off its highs as the market corrected, the stock is still up 42% from its lows closing at 3,133 on November 30.

Riding the wave of rising stock prices, Berry disposed off 26,500 shares worth 159 million on November 21. Prior to the disposal in November, Berry had offloaded shares worth 423 million in FY18. And in FY16, he sold off shares worth 30 million.

After clocking single-digit growth in last two financial years, the Britannia’s net revenue grew by grew by 12.6% (yoy), driven by healthy volume growth and product mix during the first six months of FY19. During that period, net profit growth was even more impressive at 17.9 (yoy).

While analysts continue to be bullish on Britannia’s prospects given its consistent volume growth, rapidly expanding distribution, continuous investments in R&D and significant expansion of its manufacturing facilities, its steep valuation seems to price most of its gains. The stock, which currently trades at PE of 59.9x and 47.1x for FY19 and FY20, is certainly not cheap

No wonder then the institutional investors, cautious of its pricey valuation, have also pared down their exposure. Foreign portfolio investors have reduced their stake in the company from 17.39% in September 2017 to 16.29% in September 2018. Mutual funds too, have also marginally brought down their holding them from 6.39% in September 2017 to 5.96% in September 2018 with Motilal Oswal Mutual Fund and UTI Mutual Fund reducing their stakes from 0.72% and 0.54% to 0.59% and 0.27% respectively.

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